Nathan Sutcliffe
So, what are the biggest headline changes that came out of the latest Budget- and, more importantly, how do they impact your business?
n From April 2022 the rate of National Insurance contributions will effectively increase by 1.25 per cent for employees and employers.
With the corporation tax rate set to rise to 25pc from April 2023, owner-managed businesses should be thinking about how they reward employee performance and how best to return profits to shareholders.
Back in 2015, for example, a dividend was always the most efficient route to extract company profits, with £1 profit translating to £0.56 in the hands of a shareholder. But from April 2023, that same £1 of profit would translate to £0.45.
What alternatives are there?
Shareholders with property used by their companies or with significant loans into their companies should consider charging rent/interest as appropriate.
The company will receive the 25pc corporation tax relief while the shareholder will only suffer income tax on the receipt (at 45pc for a higher rate taxpayer). However, shareholders will need to be aware of how their structure and rent charge is affecting eligibility for other reliefs such as Business Asset Disposal Relief.
We have been hearing a lot about electric vehicles but is this yet a viable option for businesses?
n The government continues to incentivise the move away from petrol and diesel to electric through generous tax incentives for companies and individuals.
100pc first-year tax relief remains in place for new, fully electric cars and the benefit in kind rate will only be 2pc from April 2022.
That means an Audi e-tron, for example, will cost a higher rate taxpayer only £480 per year.